Trico Marine Services has reported that the net loss includes the effect of a non-cash gain of $10.8 million (pre-tax) on conversion of our 6.5% convertible debt and a one-time $18.6 million tax benefit related to a change in Norwegian tax law.
Joseph S. Compofelice, chairman and chief executive officer commented, Our first quarter results were adversely affected by the sharp decline in day rates and utilization in our Towing and Supply segment in the North Sea and US Gulf of Mexico, lower utilization of our Subsea Services vessels and lower activity in our Subsea Trenching and Protection segment both due to seasonality and vessels in transit. Since the beginning of 2009, we have reduced our exposure to the North Sea by mobilizing two of our Subsea Trenching and Protection vessels to commence new contracts in China and Australia, expanded the scope of work related to contracts in the Mediterranean and completed the sale of a North Sea PSV for $26 million. Importantly, each of the 16 vessels at DeepOcean and CTC Marine are now earning revenue under contracts of various lengths at margins consistent with those realized in 2008, and we expect this to translate into improved operating results in the second and third quarters. We continue to see the fundamentals of subsea sector growth remaining strong in the second and third quarters of 2009.
In addition, Compofelice continued, we have recently taken steps to reduce our debt and capital expenditure commitments to strengthen our balance sheet for the remainder of 2009 and we will continue to aggressively pursue further reductions and refinancing of debt.
Liquidity Outlook
Since the beginning of 2009 and through the date of this release, Trico Marine Services has, through a series of transactions, continued to deliver and to decrease its capital expenditures as follows:
— Decreased by $25 million the amount due on the 6.5% convertible senior notes through holder conversions for $6.9 million in make- whole interest payments and the issuance of 0.6 million shares
— Closed the sale of a North Sea PSV for gross proceeds of $26 million, of which $15 million was used to pay down debt; and
— Terminated the obligation to fund the building of a new vessel, the Deep Cygnus, when financing terms were not favorable to Trico Marine Services – reducing its capital expenditure obligation by an additional $42 million
The transactions referred to above have decreased the face value of debt by about $40 million.
At March 31, 2009 Trico Marine Services had $60.5 million in cash and $702.9 million in net debt. During the first quarter of 2009, the company converted $23 million of convertible debt into equity and drew down $31 million under its credit facilities. Trico Marine Services realized a gain on the conversion of debt of $10.8 million.
At March 31, 2009, taking into account the termination of its funding obligation related to the Deep Cygnus, Trico Marine Services cash and credit availability to fund capital expenditures was $146 million. Committed capital expenditures through the end of 2011 have been decreased to $136 million.
Summary Results
Trico Marine Services has reported total revenues of $177.9 million for the fourth quarter of 2008 and EBITDA of $2.5 million compared to $30.3 million for the same period. Contributing to the decrease from the fourth quarter was weakness in the spot markets in the US Gulf of Mexico and the North Sea, lower consumption of Subsea Trenching and Protection vessels because of lower ploughing activity and the mobilization of two vessels in order to begin new contracts in China and Australia. Also contributing to the lower utilization in the Subsea Services segment was Total revenues decision not to market the Atlantic Challenger, a 120 meter Subsea Services vessel, in the first quarter in preparation for a long-term contract in China, which was recently granted.
Partly offsetting the decrease in revenues outlined above was a reduction in expenses of $28.3 million driven by overall lower activity and Trico Marine Services ongoing efforts to decrease costs. These efforts comprised reducing personnel in the US operations and consolidating offices globally.
Division Results
In Subsea Services segment, mainly DeepOcean, operating results were below its expectations due to exceptional seasonal softness in the North Sea, completion of projects in the fourth quarter and the decision not to market a vessel in the first quarter in preparation of a long-term contract which started in April 2009.
In March 2009, Trico Marine Services took title to one newbuild, the first of eight multi-purpose platform supply vessels acquired through the company’s purchase of Active Subsea, with the second vessel due in July 2009. The delivered vessel is anticipated to begin a three-year contract during the second quarter. Trico Marine Services also anticipates delivery, on a five-year time charter, of a Brazilian newbuild, which will replace the existing front runner at substantially lower costs on a two-year contract with Petrobras.
In Subsea Trenching and Protection segment, CTC Marine, as anticipated, experienced a seasonally slow quarter, mainly resulting from less ploughing activity and the mobilization of two vessels to China and Australia, both of which are now earning revenues under contract.
Pricing for Subsea segment’s contracts remains constant with pricing received in 2008. For the Towing and Supply segment, day rates and utilization reflected the weakness in the North Sea and US Gulf of Mexico spot markets.
